Yahoo To Acquire Right Media; Joins Google In Buying, Rather Than Building, Display Ad Network

Yahoo has
announced it will acquire Right Media,
which operates an auction-based display ad exchange calledRemix Media. The move is widely seen as
Yahoo fighting back against Google’s recent plans to acquire DoubleClick, which
itself is seen as Google jumping more firmly into the display ad network game.
Both moves to me underscore how neither players’ own existing ad networks have
apparently been good enough for their display ambitions.

Google has a massive ad network through AdSense. But that’s not display! Yes,
it is.

AdSense has been offering display advertisingsince May 2004.
That’s when advertisers were allowed to provide images and other display units
that AdSense publishers could choose to carry. It refined this to allow "site
targeting" on a CPM basis,
back in June 2005. Those looking to push a branding message could buy
impressions, rather than clicks, and have them hit particular sites (ironically,CPC
and CPA pricing were
both recently introduced). In November, Googlemade
it easier for publishers to define "channels" to be targeted within their sites.

So why’s Google acquiring DoubleClick if it already has a display ad network?
Good question.

In part, some see the answer as DoubleClick’s already huge base of customers,
which use the company primarily as a means to serve ads on other sites, rather
than to make those actual purchases. In addition, DoubleClickrecently launched
the DoubleClick Ad
Exchange. That really is meant to be just what it says, an actual ad
exchange network that DoubleClick controls. That exchange wasn’t even yet
proven, but
fear of Microsoft getting it and getting a step-up into the display ad
network space seems to be another primary reason behind Google’s move.

Those are some good reasons, but if AdSense had been tapping into display
into the way Google wanted it to, DoubleClick shouldn’t have been as necessary
to Google. Apparently, it wasn’t. So as with buying YouTube when Google Video
failed to win in the video space, Google seems to be tossing in the towel on
AdSense being enough to win in the display ad space. That will likely include
scraping the Google Display Advertising Network that it was
said to be running, though Googlespun when news came
out of about this last November that it wasn’t a new ad network.

If Google has been weak in display, Yahoo was supposedly strong there. Or so
we were told, especially by Yahoo over the years. But last year, Yahoo reported
earnings
hurt by a downturn in spending from auto and financial advertisers (big
display buyers), and just this month, financial analystshave worried that
Yahoo’s display ad growth is weakening.

Yahoo’s display network, of course, has been largely restricted to Yahoo’s
own properties. Yahoo’s own properties have huge amounts of traffic, but
Citigroup
warned back in September that Yahoo’s collection of web properties were
going to fall behind Google’s in traffic. That happened by at least February
2007, according to comScorefigures —
though it wasn’t much commented on. Instead, it wasGoogle’s leaping past
Microsoft to take the number one spot for having the most popular collection
of web properties in the world that picked up headlines.

If Yahoo’s own network of properties is slipping, how about tapping into the
web as a whole? The Yahoo Publisher
Network was
introduced back in August 2005 as a way to do this, as well as to rival
Google AdSense. However, unlike AdSense, it remains a fairly closed beta program
(you can’t immediately sign-up and start running ads — you have to be
approved). In addition, it doesn’t offer any display ads, only contextual
placement.

Potentially, YPN could have let Yahoo grow display ads beyond the Yahoo
network of properties themselves. Instead, Yahoo’s gone the Right Media route.
It
purchased 20 percent of the ad network last October. The exact amount wasn’t
disclosed, but the overall financing round raised $45 million — so that would
be a top line figure.

Today’s move gives Yahoo the rest of the company for $680 million split
between cash and stock. Yahoo CEO Terry Semelblogs
a bit more that this is a democratic move for ad sales:

We think supply and demand should be regulated by the marketplace, not a
closed platform. Right Media provides a democratic model that empowers
advertisers with all of these benefits. We think our open approach is a clear
differentiator from others in the industry and will provide significant
benefits to publishers and advertisers.

Excellent. I’m not familiar with Right Media purchasing, but I trust their
will be no minimum CPMs set in this new democratic system? And if arbitragers
figure out how to make more off the ads even if the quality of their traffic
isn’t so great, Yahoo will let the marketplace set that demand? Heh. I’m sure
democracy in the system, if not already regulated, will be to some degree. Let’s
not get too starry eyed here.

Right Media also blogged
about the planned purchase.
Right Media’s Big Ambitions from BusinessWeek is a fresh look at Right Media
overall from March, for those looking for greater background on the company. See
also discussion across the blogosphere on the purchasevia Techmeme.

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